Weekend Market Analysis 30 July 2017
Conclusion
This week witnessed the US Fed holding rates unchanged amid subdued inflation with added positives in increased consumer spending etc. Dollar value dropped and gold increased on this news, surprisingly, because this provides Janet Yellen with motivation to hike sooner rather than later (boost for US$), and gold does not like lower inflation.
The US$ has been very weak and dropped to 93.00 at the start of a region of strong support from which it will likely rebound. A Dollar rally could extend to 200-Dema which is 5% higher than present levels, and this will also drop gold further down to its final 6 month cycle low below $1200.
The gold cycle indicates the sequence is ripe for a top with additional encouraging signals in metals and miners for further moves down to follow.
General equities continue to labour at new highs (or close to) indicating continued exhaustion with negative divergence and other bearish indications.
US$
The US$ has been very weak and dropped to 93.00 before closing at 93.11 in what appears to be the start of consolidation. The 93.00 level is the start of a massive region of support that stretches back 2½ years to the beginning of 2015, and there is much consensus now that, despite the extensive bearishness, the Dollar will likely rebound from these levels. A rebound up is also likely to extend to 200-Dema which is 5% higher than present levels, and this will also drop gold further down to its final 6 month cycle low below $1200.
However, we still need a confirmed bottom with the Dollar closing above 93.95 and above 10-Dema consecutively.
The long term US$ view is extremely bearish, having now penetrated the 1st stage decline target (red) in reaching the 2½ year long region of strong support (green) at a confluence with 200-Wema (blue). Support here is likely to generate a strong rebound before once again dropping to 2nd stage decline target and beyond to 3rd stage decline target.
Gold
The gold cycle has been peaking every 34-35 trading days, and it is now 37 days since the June $1,298 high. The sequence is ripe for a top, with the slow Stochastic above 80 and continued MACD negative divergence. This is supported by bearish candles this week in metals and miners indicating further downside to follow. However, we still need a confirmed top with a close below $1,253.90.
Silver
Silver is close to a top having increased to the short term resistance trendline on reducing volume, the slow Stochastic above 80 and continued MACD negative divergence. The cycle timing is also appropriate for a top.
US Miners
The GDX US miners increased to the short term resistance trendline and a close below $22.29 will indicate a top. The slow Stochastic and MACD are also bearish, indicating more downside to follow. An increase above the resistance trendline will invalidate this outlook for now.
DUST US miners bear index
The DUST index dropped to the support trendline and the cycle timing for a confirmed bottom seems very likely (blue circles). The slow Stochastic and MACD are also promising a rise from these levels. A drop below the support trendline will invalidate this outlook for now.
General equities
General equities continue to labour at new highs (or close to) as the Dow Jones ended the week at yet another new high (21830.31), inching up in total exhaustion, with strong negative divergence stretching back to Dec last year plus the slow Stochastic at 96 and due to drop. A powerful support line is at just below 21200 and this needs to be penetrated to generate a meaningful correction,
A word on Dow Theory which states that the market will reverse when Dow Transports are not in unison with Dow Industrials. Since 14 July 2017 the Dow Jones has inched up to Friday’s close by 0.89% (in 2 weeks), and the Dow Transports has dropped by 5.29%. This suggests all is not well.
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